How Medicare is structured (Parts A, B, C, D)

Medicare is a single federal program, but its benefits are split into four statutory parts. Each part has a distinct scope, administrative structure, and claims pathway. The first structural distinction to understand is between Original Medicare — Parts A and B administered directly by CMS — and the private-plan pathway of Parts C and D. A beneficiary may be enrolled in different combinations of parts, and the combination affects who receives and adjudicates a claim.

Part A — Hospital Insurance

Covers inpatient hospital stays, skilled nursing facility care, hospice, and certain home health services. Part A is the institutional side of Medicare and is discussed further in Medicare Part A billing.

Part B — Medical Insurance

Covers physician services, outpatient care, preventive services, durable medical equipment, and many drugs administered in a clinical setting. See Medicare Part B billing for the professional claims pathway.

Part C — Medicare Advantage

A private-plan alternative that delivers Part A and Part B benefits (and often Part D) through CMS-contracted insurers. Covered in Medicare Advantage (Part C) billing.

Part D — Prescription Drug Coverage

Provides outpatient prescription drug benefits through private plans under contract with CMS, either as a standalone plan or bundled into a Medicare Advantage plan.

Under Original Medicare, CMS pays for covered services on a fee-for-service basis and contracts the operational work of processing claims to regional Medicare Administrative Contractors (MACs). A MAC processes claims, makes local coverage decisions, handles first-level appeals, and issues payments within its assigned jurisdiction. Because MAC jurisdictions differ, some operational rules and local coverage determinations (LCDs) can vary from one region to another even though the underlying program is national.

Part A and Part B generally travel through different claim formats. Institutional services billed under Part A are submitted on the institutional claim standard, associated with the UB-04 paper form, while professional services under Part B use the professional claim standard, associated with the CMS-1500 paper form. Whether a service is covered, and at what amount, depends on program rules, medical necessity, and coverage determinations that vary by jurisdiction and effective date.

Parts C and D are not administered directly by CMS on a claim-by-claim basis. Instead, CMS contracts with private insurers who assume responsibility for delivering benefits, adjudicating claims, and managing utilization. A Medicare Advantage (Part C) plan must cover at least the same categories of service as Parts A and B, but it operates its own networks, prior authorization rules, and appeal processes. As a result, billing a Medicare Advantage plan can differ from billing Original Medicare even for the same clinical service.

Part D operates entirely through private drug plans, either standalone or bundled into a Medicare Advantage plan. Because plan design, formularies, and cost-sharing are set at the plan level and change annually, drug coverage under Part D cannot be assumed from the program alone. Confirming which plan a beneficiary is enrolled in is part of eligibility verification, and the correct payer routing depends on that determination.

The part that governs a service drives nearly every downstream billing decision: the claim format, the payer that adjudicates, the applicable coverage rules, and the remittance advice that reports the outcome. Misrouting a claim — for example, submitting to Original Medicare a service that should have gone to a Medicare Advantage plan — is a common source of denials. Correct part identification also governs assignment and participation rules and coordination when Medicare is not the primary payer.

Coordination is a further consequence of the structure. When another payer is primary, Medicare Secondary Payer (MSP) rules and coordination of benefits determine the order in which payers are billed. These rules interact with the part structure and are covered in Medicare Secondary Payer (MSP) billing.

Regardless of part, a provider must be enrolled in Medicare to bill the program, and that provider enrollment is handled through PECOS, the CMS Medicare enrollment system. Enrollment and billing privileges are a prerequisite discussed in Medicare enrollment and billing privileges. Each beneficiary is identified by a Medicare Beneficiary Identifier (MBI), which is required on claims regardless of which part applies.

1. 01

   Confirm enrollment and identifiers

   Verify the beneficiary's MBI and enrolled parts before service, and confirm the provider's active enrollment through PECOS.
2. 02

   Determine the governing part and payer

   Identify whether the service falls under Part A, Part B, a Part C plan, or Part D, and route the claim to the correct adjudicating payer.
3. 03

   Apply the correct rules and format

   Use the appropriate claim standard and observe the coverage, authorization, and timely filing rules for that part and payer, which vary by plan and jurisdiction.